JPMorgan Chase Kicks Off Third Quarter Earnings Season

Dow component JP Morgan Chase and Co. (JPM) kicks off third quarter earnings season on Tuesday, highlighting a hopeful quarter in which economic activity ticked higher around the world. Wall Street analysts now expect the banking giant to report $2.24 earnings-per-share (EPS) on $28.12 billion in Q3 2020 revenue.  That would mark a 15% decline in profits compared to 2019, reflecting pandemic headwinds that could persist well into next year.

Growing Bank Sector Headwinds

September’s blockbuster money laundering report implicated JPMorgan, alleging more than $500 billon in suspicious transactions in the last 20 years. The matter has been turned over to the Department of Justice and the Treasury Department’s inspector general. Their potential involvement could impact sentiment in coming quarters because it’s the largest U.S. bank and a Democratic administration could take a more aggressive stance than the current White House occupant.

In addition to the pandemic and its dampening effect on economic activity, commercial banks may have to deal with long-term ultra-low interest rates. Federal Reserve Chairman Jerome Powell recently outlined a dovish new formula that has the potential to depress industry profits for the next two to three years, at a minimum. Of course, rates have already fallen precipitously, dropping the banking sector near the bottom of the bull market performance list.

Wall Street And Technical Outlook

Wall Street consensus on JPMorgan is generally upbeat, with a ‘Moderate Buy’ rating based upon 7 ‘Buy’ and 3 ‘Hold’ recommendations. One analyst now recommends that shareholders close positions and move to the sidelines. Price targets currently range from a low of $80 to a street-high $122 while the stock closed Friday’s session about $10 below the median $111 target. This placement perfectly matches sideways price action in the second and third quarters.

The stock ended several years of market leadership in the first quarter, descending from an all-time high to a three-year low. The downdraft crushed 200-day moving average support on high volume while three attempts to mount new resistance have failed. A mild winter and an effective vaccine should lift JPMorgan above this formidable barrier but current shareholders should keep one finger on the exit button because a trip into the March low is also possible.

For a look at all of today’s economic events, check out our economic calendar.